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CHICAGO - Philip Morris USA has cut wholesale discounts on its best-selling Marlboro cigarettes and three other brands, effectively raising prices for the first time in more than two and a half years.
According to a company spokeswoman, the cigarette giant, a unit of Altria Group Inc., told wholesalers last week it would reduce its "off-invoice" discounts to $5.50 a carton from $6.50. Analysts said in research reports that the move will effectively raise prices by 10 cents per pack on Marlboro, Virginia Slims, Basic and Parliament cigarettes.
"By finally increasing its prices, Philip Morris has signaled that it has confidence in the improving U.S. fundamentals," said Bonnie Herzog, analyst at Smith Barney.
The change, effective for shipments on Dec. 12, had been anticipated, and Altria shares dipped less than 1 percent in early trading on the New York Stock Exchange.
The price gap between premium and deep-discount brands has been stable at between 44 percent and 48 percent for the past several quarters, Robert Campagnino, analyst at Prudential, said in a research report.
Analysts saw the announcement by Philip Morris as a positive sign for the entire tobacco industry.
Campagnino raised his target price on Lorillard Tobacco parent company Carolina Group's stock to $32 from $30 and on Reynolds American to $74 from $71. "We interpret it as a lessening of competitive pressures in the tobacco industry," the analyst said.